3 Person Mortgage

Does it cost to add someone to a mortgage?

Yes. It involves something called Transfer of Equity. Effectively, if you and I owned a house together and a third party was coming onto that mortgage, they would need to go on the mortgage and the deeds.

A Transfer of Equity would change it from you owning the property 50-50 to owning it a third each. You’re giving away 17% of your equity to this other party. There would be some legal fees from around £200 to £500.

In some cases the new buyer would also have stamp duty to pay on their share, rather than the overall value. You would still have an element of stamp duty to pay too. Let’s say I owned a house on my own and then you were buying into it, you would have stamp duty to pay because you’re going to own some of my property. It’s exactly the same moving from two to three, or three to four.

Are there any other costs we need to know about?

Those are the main ones. There would normally be a solicitor’s fee, which could approach about £500 or be as low as £200.

If somebody’s asking to add a party on the mortgage and their current deal is coming to an end, we’d normally do a remortgage. At the same time as the remortgage, we’d do the Transfer of Equity, as that works out a little more cost effective than doing it midterm.

It saves quite a bit of money on legal fees. Normally with a remortgage, you get free solicitors, so you would just pay for the cost of the Transfer of Equity, which works out cheaper.

So the cost will depend on when you do it. In an ideal world, you’d meet a new partner that wants to join your mortgage close to the end of your fixed rate term, and then we could do a Transfer of Equity at the same time – making it a bit cheaper.

What are the pros and cons of having three people on a mortgage?

The main pro is that having three of you owning a property together could get you into a better location and a better property.

You’ve got three people sharing the cost of the bills and the cost of the mortgage. It’s a way to get onto the next step of the ladder, thanks to three people buying.

The main disadvantage is if there’s a falling out. I’ve got a client at the moment where one person wants to come off the mortgage. As it stands at the moment, the two that are left can’t take that mortgage on their own, so the lender won’t let that third person off. They need to find a third person to replace them.

It’s all down to affordability. This lender won’t let them change because two people’s income won’t cover that mortgage. That lender needs to make sure that mortgage gets paid.

You do need to consider how secure the friendship is when you go into this. If there are any problems, once you’ve got a big mortgage around your neck, plus gas, electricity and council tax, the cracks may start to show.

Which lenders offer mortgages to groups of three or more people? Are there many?

The majority of lenders, including those on the high street, will allow three or even four people on a mortgage. The more important question is which lenders take into account all three incomes, because that’s what people tend to want on a three-person mortgage.

There’s no point in me naming the lenders today, because criteria change on a daily basis. Any of them might stop or start using the third income at any point. I would obviously talk to the clients, find out their circumstances and what they needed to see whether that means three incomes or just the best two.

Then we’d look at the different lenders and rates to fine-tune it to the clients’ circumstances.

How can I get a three-person mortgage or multi-applicant mortgage? How can a mortgage broker help here?

I touched on it in the last question. Once we’ve spoken to a client, we work out whether we need all three incomes, or even four, or if we can manage on the top two incomes.

If you needed three incomes, we’d find suitable lenders and then compare the different lenders to see which is the cheapest. That’s how a mortgage broker would assist – we’d find the right lender for the clients’ circumstances.

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